Inside the world of business
NTMA chief employs L’Oreal defence to justify salaries
JOHN CORRIGAN, chief executive of the National Treasury Management Agency, used the “L’Oreal – because we’re worth it” defence when it came to justifying the high private sector rates paid to the staff of the State’s debt manager. Passionately defending the NTMA’s performance and related pay at the Oireachtas finance committee yesterday, Corrigan said the agency was set up on private sector pay levels to get skilled staff doing “market-demanding” work.
Pretty much running the same defence as his predecessor Michael Somers ran, Corrigan said the NTMA was not responsible for the economic collapse. The agency had raised €16 billion last year before the EU-IMF bailout.
“It wasn’t the failure of the NTMA to do its funding that blew the country up – it was the failure of the banks,” he said.
Corrigan had figures ready to roll out to explain how the NTMA was “a very serious business”. Some €1.2 trillion of cash flowed through the agency last year while it managed assets and liabilities of €250 billion.
Corrigan said public concerns about pay levels at the NTMA were understandable but that the real debate was about the business model. Staff had to be incentivised, he said, or they would head for greener pastures. He knew bonuses were “a dirty word”. He used Nama staff as an example. They were incentivised to recover loans for the agency and “put themselves out of business as soon as they can”.
As for Nama’s developers, its chairman Frank Daly said the agency agonised over agreeing pay of €75,000 to €100,000, and up to €200,000 a year in some cases. Developers were also being incentivised with payments of 10 per cent of what they recover on loans. This was “unpalatable”, Daly said, but necessary to recoup as much money for the State.
It seems lots of people are worth it, even the ones responsible for borrowing recklessly and lumbering heavy debts on the State.
Emirates zooming in
TO SOME, it might seem odd that the Dubai-based airline Emirates has decided to begin flying from Dublin on January 9th, given the recession here and the steep decline in outbound travel over the past three years. Those in the industry here, however, are surprised it has taken so long.
Its rival Etihad, which is based in neighbouring Abu Dhabi, has enjoyed considerable success with its Dublin services in recent years. Etihad doesn’t publish financial information for the route but it is thought to be highly profitable.
Laurie Berryman, who leads Emirates' operations in Britain and Ireland, told The Irish Timesyesterday that Dublin had been on its radar for about 10 years. With more than 40 new aircraft being added to its fleet, Emirates looked at where it might place them.
“Dublin was always quite a way up that list,” Berryman added.
Like Etihad, Emirates will market its route as a gateway to Asia and Oceania. Onward connections are the cream on the cake for long-haul carriers. While Emirates and Etihad will go head-to-head on certain routes, the Dubai airline’s connections to Hong Kong, New Zealand and Perth in Australia will offer a point of differentiation.
The decision is good news for the Dublin Airport Authority and for Ireland in general. Berryman expects about 50 per cent of summer traffic on the route to be inbound to Ireland. It has experienced a similar trend on its service to Glasgow in Scotland.
Not that daily flights by Emirates will solve all of the DAA’s difficulties. Short-haul flights to Europe remain its bread and butter and this sector will remain subdued for some time due to the dampening effects of the recession on consumer spending and Ryanair’s decision not to chase market share for now.
Tullow strikes again
JUST OVER two weeks ago, it looked like Tullow Oil could have two or three more exploration aces up its sleeve. Chief executive Aidan Heavey said it hoped to be delivering some news on these prospects in the near future.
Right on cue, Tullow yesterday announced it discovered what could be a significant amount of oil off the coast of French Guiana, an area that boasts a similar geology to the Jubilee Field, where it is on track to produce 120,000 barrells of oil a day next year.
Tullow put geology at the heart of its approach to exploration, or more particularly, geologies that have worked for it in the past. The initial signs from South America are that there are possibilities that this could pay off once again. The company found a 72m column of oil. At a similar stage with Ghana four years ago, it found a 34m column.
Investors reacted predictably to the news, almost the only positive announcement in Dublin or London yesterday.
Oddly enough, dealers in Dublin pointed out that despite the yesterday’s surge, and a decent hike earlier in the week, the shares are not that far ahead of where they were a year ago. It closed at €16.50 in Dublin last night, it was €15.20 at the close of business on September 9th, 2010. So, there might yet be a bit more upside in its share price. Some analysts seem to think so. Royal Bank of Scotland yesterday raised its target for the Irish company to £15.05, compared to its £14.13 close in London last night.
If you bought shares in Tullow 10 years ago, they would have cost you around €2.12, so you have made eight times your money – not a bad return in anyone’s language.
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Next Week
European finance ministers and central bankers meet on Thursday for an update on the sovereign debt crisis and on the fallout from the surprise resignation yesterday of ECB chief economist and executive board member Jürgen Stark.
